Uber claims that it is operating a technology firm that contracts taxi services from driver-partners to meet its clients’ demands. It is unfortunate that the stance of some government officials is to ban a technological advancement instead of working to ensuring all safety concerns are met and to encouraging an efficient and competitive market. Uber is not alone; other innovated taxi companies such as Lyft, Sidecar, and Flywheel have also opened up around the world in an attempt to better serve the taxi market. Current regulations stand in the way of competition and are likely stifling innovation when enforced without careful consideration.

Toronto presently authorizes 1,313 ambassador taxi licences along with 3,451 standard taxi licences. Ambassador licences are untradeable and their owners must operate the taxi. The standard licences are problematic, in that they can be purchased and then rented out to drivers who pay exorbitant fees for the right to work. Drivers have reported paying $1,500-$2,000 a month to middlemen in order to be permitted to work in the city. The restriction on the number of available licences has driven up the price of ownership to levels that are unreachable by many drivers. A single license was selling for as much as $300,000 as of February 2014.

Toronto operates with a taxi density of 18 cabs per 10,000 people, which is denser than comparable Canadian cities such as Vancouver (10 cabs per 10,000 people) and Ottawa (15 cabs per 10,000 people). However, this lags far behind major American cities such as Boston (30 cabs per 10,000 people) and New York (63 cabs per 10,000 people). The City of Toronto has historically restricted the number of taxi licenses to ensure drivers’ earnings; but the current arrangement allows middlemen, garages, and dispatch services to absorb a significant portion of the benefit from this government-created monopoly. The City of Toronto recognised this and proposed converting current licences into new Toronto Taxi Licences by 2024, which would require owners to drive the cab and only rent out the licence part time. This change would prevent a single owner from collecting rent indefinitely on multiple licences. Disappointingly, earlier this year Ontario’s Superior Court ruled that a mandatory deadline for conversion cannot be imposed by the city.

That said, the new Toronto Taxi Licences would not have addressed the problems associated with a lack of competition. Industries that operate under regulatory protection for extended periods of time have a tendency to become uncompetitive and stagnant with regard to innovation. This is highlighted by the way consumers flock to a new competitor. Uber has had an easy time entering markets throughout the world where customers find their ease of use, improved dispatch response time, price point, and quality of service all to be improvements over the competition.

A 2015 working paper issued by Princeton’s Industrial Relations Section analysed the demographic of Uber drivers and compared their findings to traditional taxi drivers. They found that Uber drivers’ earnings were at least as high as those of traditional taxi drivers and that drivers’ hourly wage did not decrease when they worked fewer hours (avoiding the typical wage penalty). The researchers also found that, relative to taxi drivers, Uber drivers are more similar to their clientele in almost all demographics, such as age, education, and gender[1]. The decreased cost for consumers has translated into an increased demand for taxi services at large.

Toronto’s mayor, John Tory, agrees with many Torontonians that people want better technology, more convenience, and more affordability in their taxi service. If a company can provide this in a safe manner, then the city should work with them to make it a reality. Uber is the competition that the taxi industry needs. Removing artificial monopolies and updating regulations can allow the taxi industry to better serve the public through lower rates, higher quality service, and enhanced driver earnings.[2]